Corporate tax will be implemented in the UAE starting this week, bringing significant changes to the country taxation system. The Ministry of Finance has emphasized that personal income from employment, real estate, and other investments will not be subjected to corporate tax.
For the first time, the UAE Ministry of Finance has announced the introduction of federal corporate tax, which is expected to have globally competitive rates. The new tax will apply to business profits from the beginning of the first financial year commencing on or after June 1, 2023. A standard statutory tax rate of 9% will be applicable, while multinational companies earning over 750 million euros in profit will face a slightly higher rate of 15%, according to The National.
To support small businesses operating across the emirates, a zero tax rate will be implemented for taxable profits up to Dh375,000. This initiative aims to alleviate the burden on smaller enterprises and foster their growth.
The Ministry of Finance has clarified that corporate tax will not be imposed on personal income generated from employment, real estate, or other investments. Additionally, any income not arising from business or commercial activities will be exempt from corporate tax.
Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, highlighted the introduction of corporate tax as a means for the UAE to align with international standards regarding tax transparency and the prevention of harmful tax practices. Al Khoori emphasized that the implementation of a corporate tax regime will support the UAE's strategic goals and encourage businesses to establish and expand their operations within the country.
There will be certain exemptions and conditions. Companies engaged in the extraction of natural resources, which are already subject to Emirate-level corporate taxation, will be exempt from the new tax. Additionally, corporate tax incentives currently offered to freezone companies conducting business outside the mainland UAE will continue to be honored. The UAE does not plan to impose withholding taxes on domestic or cross-border payments, nor will it subject foreign investors who do not operate businesses within the UAE to corporate tax.
To ensure a smooth transition to the new corporate tax system, businesses will be provided with ample time to prepare. The Ministry of Finance plans to release more detailed information by the middle of the year, enabling companies to adequately adapt to the changes. For further information, businesses can visit tax.gov.ae.
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